"How Sweet the Sound?" - Not for Ad Man Who Didn't Utilize Confidentiality Agreement

Captain D's is a restaurant that sells a lot of fried fish. Jeffrey Greenfield collaborated with Erwin–Penland, a South Carolina advertising agency, on a marketing plan aimed at securing a contract with the Captain D's restaurant chain. Captain D's declined to implement the proposal, which centered on the general concept of a gospel choir competition entitled “How Sweet the Sound .” Erwin–Penland, however, later convinced another client, Verizon Wireless, to fund a modified version of the project, but without the participation of Greenfield or his company, 1st Approach LLC (collectively “Greenfield”). Greenfield subsequently demanded compensation from Erwin–Penland, who responded by filing a declaratory judgment action in South Carolina state court, seeking a ruling that Greenfield had no ownership interest in the “How Sweet the Sound” concept.

Greenfield removed the case to federal court and counter-sued and brought in everybody, including Verizon. Somebody had to pay him for this concept he originally shared with Erwin-Penland, right? Wrong, says the federal court in South Carolina and the appellate court at the Fourth Circuit.

Seems Greenfield didn't use any kind of NDA or confidentiality agreement BEFORE sharing his idea with Erwin-Penland.

Greenfield did come up with the ideas for, or introduce the concept to, the following: Greenfield sent Erwin–Penland a marketing deck outlining a concept he labeled “ ‘Amazing Grace’ Captain D's Branded Reality Show.” Erwin–Penland subsequently changed the name of the proposal to “How Sweet the Sound.” The “How Sweet the Sound” concept involved “[t]he top 20 church choirs in the U.S. competing for over $250,000 in prizes and the title of the Best Choir in the USA.” A production team of producers and cameramen, along with a host “[s]imilar to Ryan Seacrest on American Idol,” would “cross the country in [a] 6 week trek of visiting EVERY Captain D's location,” using local media to publicize the event. Once there, the team would interview local choir members about their “choir and why they think they are the best in the US.”

Competitions would then take place in Atlanta, Georgia; Jackson, Mississippi; Birmingham, Alabama; and Charleston, South Carolina between the best twenty-five choirs in each region. Each contest would be featured in a television episode, take place “in large arenas,” and “have a large panel of celebrity judges who [would] vote on the best overall performance.” The winners of the regional competitions would then “be invited to attend [a] National competition in Nashville,” Tennessee featuring “the 4 best church choirs in the country in an authentic inspirational contest to find the # 1 Choir in the USA.” Id. Winning the national competition would entitle a choir to “the title of the Best Choir in the USA” and “over $250,000 in prizes.”

Although Captain D's passed on the idea, Greenfield and Erwin–Penland presented a similar “How Sweet the Sound” concept to Verizon Wireless, one of Erwin–Penland's existing clients. Modifications were made to this proposal to better suit Verizon Wireless' business model. For example, Greenfield and Erwin–Penland suggested signing choirs up for the competition at Verizon Wireless stores and creating “a CD of the winning choirs” that would be distributed “through stores and agents.”

Although Verizon Wireless also expressed interest in the “How Sweet the Sound” concept, it had concerns about the plan's projected cost. Greenfield and Erwin–Penland subsequently worked to scale back the television component of the project to a one-hour special or documentary. When Verizon Wireless' response to this less-expensive model was not immediately forthcoming, Greenfield inquired as to whether Verizon Wireless was still interested in the concept or whether he was free to present it to other clients. Erwin–Penland responded that Verizon was still considering the scaled-back plan.

Over a year later, Erwin–Penland and Verizon Wireless implemented a limited “How Sweet the Sound” marketing concept by organizing a single gospel choir competition in Memphis, Tennessee. The project later evolved into a series of gospel choir competitions orchestrated throughout the nation. In 2009, the final contest was televised on the Gospel Music Channel and a documentary about the series appeared on the Black Entertainment Television Network (“BET”). Although other agencies aided Erwin–Penland and Verizon Wireless in implementing the “How Sweet the Sound” concept, Greenfield was not asked to assist, and had no part, in executing the plan.

Greenfield demanded compensation and arguments ensued regarding whether the concept was essentially his trade secret. Erwin-Penland didn't agree and brought the suit instead of waiting for Greenfield to sue them. The trial and appellate courts both focused on Greenfield's failure to use reasonable means to keep his secrets, in fact, secret. The Fourth Circuit noted that "individuals “entitled to a trade secret” and desiring “to have its exclusive use in [their] own business” are barred from “lightly or voluntarily hazard [ing] its leakage or escape. Revealing a trade secret to others is consequently fatal to its protected status unless one “exercise[s] eternal vigilance.” The exercise of “eternal vigilance” imposes a heavy burden on the owner of a trade secret, as it “calls for constant warnings to all persons to whom the trade secret has become known and obtaining from each an agreement, preferably in writing, acknowledging its secrecy and promising to respect it.”

Greenfield's rebuttal - that he placed confidentiality stamps on most of his materials - didn't persuade the appellate panel. "Although Greenfield unilaterally placed confidentiality notices on some of his materials, these notations are not sufficient to create a genuine issue of material fact as to the reasonableness of his conduct. South Carolina courts do, of course, require such “warnings to all persons to whom the trade secret has become known.” But South Carolina law is clear that warnings alone are insufficient to place a trade secret within the sphere of protection provided by the Act."

Judge Gregory, dissenting in the case, thought the jury should have decided whether Greenfield's efforts to protect his "secrets" were sufficient: "There is a rich record with details pointing in both directions regarding Greenfield's efforts to protect his ideas, with both copyright and confidentiality notices, including one that was specifically removed by EP without Greenfield's permission, that indicates while the arguments in his favor may ultimately be overcome, a jury should at least have been allowed to view his efforts."

Judge Gregory noted "There was no non-disclosure agreement (“NDA”) between the parties. Nevertheless, the two had extensive collaboration including conference calls, meetings, and materials sharing. The information Greenfield transmitted to EP, in the form of PowerPoint slides as part of a presentation “deck,” was under explicit confidentiality provisions. Specifically, the disclaimer on the slides presented to Captain D's read: “[t]he ideas and concepts contained within this document are the sole and confidential property of 1st Approach, LLC and will not be shared with any other agency or utilized without prior written consent.”

Unfortunately for Greenfield, Judge Gregory was only one of three appellate judges who believed his case should've gone to the jury. We'll see if he asks for en banc review.

The case can be cited as Hill Holliday Connors Cosmopulos, Inc.v. Greenfield, Slip Copy, 2011 WL 2160642 C.A.4 (S.C.),2011.